Paying At The Pump: Gas Prices Surging, But Why?

There are a lot of factors which impact gas prices. Supply, demand, taxes, and more. Prices always surge in the summer, but this year could be worse than ever. Where are costs highest? And where are they the lowest? Let’s take a closer look.

CBSNews reports that this summer, it may cost an additional $70 to fill your tank each month thanks to gas prices on the rise. An increase in roughly $250 overall for the season. It wasn’t too long ago that gas which fell below $3 a gallon was common. Of course, much of that has to do with your location.

Gas for $3 a gallon or less? Where is this mystical land of magic gas prices? You may be thinking that depending upon where you live. Some people have rarely seen gas so cheap. Others have never known gas prices to be so high.

Location matters when it comes to paying at the pump. More on that later.

Year over year, gas prices have shot up dramatically. It’s to the point that nearly every state in the country is seeing an increase in costs. Last year in June of 2017, most of the country saw relatively low gas prices. One year later, things are different as seen above.

Gas prices always surge in the summer. But why? Here are a few reasons.

The Summer Blend

Not all gas is created equal. During the summer months, gas stations use a different gas blend as opposed to the winter. Among other things, this special summer gas reduces smog. Not all gas prices are created equal either. The summer blend can add an additional $0.10 – $0.15 per gallon to the cost.

What about the winter? Yup, the winter blend isn’t as costly. This is why the price at the pump tends to drop more in the fall and winter.

Supply / Demand Increases Gas Prices

Gas prices respond to market forces much like any other product. In summer, people tend to drive more. They take longer trips and travel longer distances. As a result, the average person uses more gas. This alone can increase your monthly gas usage.

However, the increased demand for gas cuts into the available supply and gas prices increase. Conversely, people drive less in the winter so gas prices go down.

Location, Location, Location

If you look at the gas prices in the charts above, it should come as no surprise that prices are lower in the south. The southern United States is “gas country” for lack of a better word. Proximity to refineries and distributors means less transportation costs to pass on to the consumer.

At the same time, locations plays an important role in other ways .States have the power to levy excise taxes on gasoline and other products. In the south, taxes on gasoline tend to be lower. Some of that is based on the proximity to distribution. A lot of it is based on the presence of the industries in these states which is often a driving force of the local economy.

The further away you go, the higher taxes tend to be. Hawaii, for example, has some of the highest gas prices around. Why? Because it’s an island in the middle of the ocean. It costs a great deal of time and money to get products to the island. As a result, gas prices go up.

The same applies for Alaska, which is remote in its own way. Still, other states may levy taxes for environmental reasons. California, for example, has set clean gas standards which cost more and lead to higher gas prices.

When it comes to gas prices, location matters. Where you live in the country will impact the price you pay at the pump. In California, roughly $0.71 per gallon are taxes. In Hawaii, $0.64 per gallon are taxes.

The state with the lowest tax on gasoline? Texas, where only $0.20 per gallon are taxes. It’s no surprise then that Texas has some of the lowest gas prices around!

Come To Texas For the Gas Prices!

Few people are going to pick up and move to Texas based solely on the price of gas. However, it may be something to consider. In general, the overall cost of living of an area should be a factor in the decision making.

Low gas prices and no state income tax makes Texas an attractive place to live. But location matters, remember? The question isn’t whether Texas has a few attractive reasons for moving there. The question is how moving to Texas would impact your cost of living.

That’s where City vs City can help! City vs City is a cost of living application that seeks to answer one simple question: how much do you have to earn in another city to maintain the standard of living you currently enjoy?

For example, if you currently live in Seattle, Washington; how will your cost of living change if you move to Austin, Texas? Take a look below for a demonstration of how City vs City helps you see the difference a move makes.

As you can see, City vs City helps answer that question. Simply input your data, select your cities, and let the powerful technology go to work. As a result, you’ll see a side by side comparison of costs and know which city can offer you a better cost of living arrangement.

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The estimates provided by this cost-of-living calculator are not exact, they are just more precise estimates than what alternative calculators can produce. Always consult with a tax professional before making financial decisions